World's first and fourth-largest record labels will now come together as one.

On Friday, regulators on both sides of the Atlantic approved the mergers of the Universal Music Group and EMI Recorded Music, the world’s first and fourth largest such companies, respectively. Universal spent $1.98 billion to buy EMI. The Federal Trade Commission, in a unanimous vote, said it was closing the investigation into the deal "without taking any action," which effectively approves it. Had the deal been in place for 2011, the combined companies would have had six of the top 10 pop songs of that year.

In a statement, the European Commission said it was particularly concerned that the deal would "significantly worsen the licensing terms it offers to digital platforms that sell music to consumers."

"Competition in the music business is crucial to preserve choice, cultural diversity, and innovation," said Joaquín Almunia, Commission Vice-President in charge of competition policy, in the same statement.

European regulators, in approving the deal, required that Universal divest itself of some of its notable assets, including EMI France, EMI’s classical labels, Chrysalis, Coop, and Parlophone label—home to Coldplay, Pink Floyd, Gorillaz and others. EMI, which is based in the United Kingdom, is also the rightsholder to the Beatles’ hugely valuable catalog, which the new company will retain.

Fewer players = bad for consumers

However, some IP legal observers—comparing it to last year's proposed T-Mobile USA and AT&T merger that the Department of Justice shot down—remain worried that when the number of major players in any industry falls, that can only be bad for consumers.

"American consumers have really enjoyed the new digital music services," said Jodie Griffin, a staff attorney at Public Knowledge, in an interview with Ars. "And our concern now is that by holding such a big market share of recorded music, that the post-merger [Universal Music Group] will be able to dictate which services survive in the digital music market. And if you can’t get the blessing of UMG, you can’t launch, and ultimately that will hurt consumers."

She noted that EMI has been the "scrappy" player in the recording industry for years. Case in point: back in 2007, EMI became the first of the Big Four to halt the use of DRM on its digital music sales. The other three—Universal, Warner, and Sony—soon followed.

"That willingness to experiment puts pressure on the others to do the same," Griffin added, noting that with a combined market share of around 45 percent, the new Universal will have even less incentive to fully compete.

Gabriel Bluestone, a San Francisco business regulation attorney who has previously written publicly against this merger, told Ars the FTC "botched it pretty badly."

"The [European Commission] has found that the merger presents genuine antitrust issues, particularly as to digital distribution," he wrote in an e-mail. "The [EC] makes clear that those issues, although common to Europe and the US, are national or [European Economic Area]-wide and therefore not susceptible to a single ‘global’ remedy, and they are now resolved in Europe. To me, that underscored the need for the FTC to do at least as much to protect competition here in the US—especially since most of the digital innovation happens here."